Business

Wednesday March 4, 2009

Ringgit affected by deleveraging, repatriation of funds to US

By YVONNE TAN


KUALA LUMPUR: The ringgit, which fell to a three-year low against the US dollar on Monday, is facing a global trend of deleveraging and repatriation of funds back to the US, said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

“It (the fall in currency value) is not unique to Malaysia,” she said yesterday at the sidelines of the official launch of Public Islamic Bank Bhd. “At this stage, we believe that so long as the market remains orderly, that is what is important.”

The ringgit fell to 3.725 to the dollar on Monday.

Zeti said the fall reflected the strength of the dollar following the deleveraging that’s taking place and remitting of funds to the US, following demand for the greenback.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz (right) signing on a plaque to officiateat the launch of Public Islamic Bank Bhd witnessed by Public Bank Bhd MD and CEO Tan Sri Tay Ah Lek (left) and founder and chairman Tan Sri Dr Teh Hong Piow.

Earlier she said the international and domestic operating environments would become even more challenging.

“Delays in the resolution of the financial crisis in the advanced economies have resulted in a sharp and rapid deterioration in recent months,” she said.

Zeti said while there had been concerted monetary policy action and fiscal stimulus measures across the globe, confidence needed to be restored.

“This can, however, only happen when the financial systems in the crisis-affected countries are repaired and credit continues to flow again, when markets continue to function efficiently and when prices reflect the value of the assets,” she added.

As an open economy, Malaysia was already adversely affected by the global developments although its banks remained sound and well capitalised, she said.

“The domestic conditions are expected to remain challenging in the coming quarters and a range of policy responses are being implemented,” she said.

It was vital to ensure that the domestic intermediation process remained strong so as to support domestic demand, Zeti said, noting that “the fiscal stimulus is key to containing the effects of the external developments and placing Malaysia in a position to resume growth once conditions in the global economy stabilises.”

Separately, Public Bank founder and chairman Tan Sri Teh Hong Piow said that in the last five years, total assets of Public Islamic Bank grew at a compounded annual growth rate of about 20%.

Public Islamic Bank had current total assets of RM16.5bil, representing 8.4% of the total assets of the Public Bank group, Teh said.

Zeti said Islamic banking assets accounted for 17.4% of total banking assets in the local financial system while in the bond market, the sukuk market accounted for 57% of the total market as at end-2008.

“During this challenging period, financial institutions including Islamic financial institutions have an important role to ensure the continuous access to financing by the private sector,” she said.

Malaysia currently has 17 Islamic banks, of which nine are subsidiaries of domestic banking groups.


For Bank Negara statements click here

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